A coffee shop chain opens across the street from a locally owned coffee shop.The base expenses for coffee and pastries are similar.However, the chain has corporate backing for support and therefore makes a decision to radically lower prices.Thus, it succeeds in attracting customers to its facility and eventually drives the local competitor out of business.This is an example of:
A)price fixing.
B)price discrimination.
C)predatory pricing.
D)referral selling.
E)resale price maintenance.

Question

Quizplus · Accepted Answer

This scenario is an example of predatory pricing, where a large company with more resources and financial backing lowers prices to drive out competition and gain market share. This unfair pricing strategy can result in a monopoly and ultimately harm consumers in the long run.

A Coffee Shop Chain Opens Across the Street from a Locally